May 13, 2011

Well, let’s think about bankruptcy … banks are no longer allowed to go bust … countries are no longer allowed to go bust … now, it would appear, power companies can no longer go bust:

Japan’s government will provide financial aid for Tokyo Electric Power Co. to protect the utility from bankruptcy as it pays compensation to those affected by the worst nuclear disaster in 25 years.

Japan’s government will create a body to handle claims made against Tepco, as the company is called, and will issue bonds to fund them, according to a statement released today after a meeting of Prime Minister Naoto Kan’s cabinet.

“Our requirement is that the company continues to operate as a listed company and continue to provide a stable supply of power,” Trade Minister Banri Kaieda told reporters after the statement was released. He said Tepco bondholders rights will be maintained.

Power companies that operate nuclear stations will be required to pay into the compensation organization being set up by the government, according to the statement.

Tepco will be monitored by the government as a condition for aid to ensure full compensation will be paid to those affected by the disaster, Kaieda said earlier this week.

“Eventually, the matter could become one of how to share the burden between Tepco and the government, but it will be something to be decided in the distant future,” [Chief Cabinet Secretary Yukio] Edano said.

Still, it hasn’t done the Samurai market any harm:

HSBC’s unit HSBC Bank Plc sold 108.2 billion yen of five- year, 0.91 percent bonds priced to yield 31 basis points more than the yen swap rate, and 35.2 billion yen of floating-rate notes that pay 46 basis points over the three-month London interbank offered rate, according to data compiled by Bloomberg. The bank had planned to sell at least 50 billion yen of notes, according to a person familiar with the matter, who asked not to be identified because the information is private.

Lehman defaulted on 195 billion yen of Samurai bonds when it filed for bankruptcy in September 2008, a collapse that froze global credit markets and curbed investor demand for all but the safest government debt. Today’s sale is the biggest without a sovereign guarantee since Citigroup Inc. sold 186.5 billion yen of three-year, 2.66 percent Samurai bonds to individual investors in June 2008, Bloomberg data show.

US inflation ticked up a bit:

The cost of living in the U.S. rose in April, led by increases in food and fuel costs that are starting to filter down to other goods and services.

The consumer-price index increased 0.4 percent, matching the median forecast of economists surveyed by Bloomberg News and following a 0.5 percent advance in March, figures from the Labor Department showed today in Washington. Excluding volatile food and energy, the so-called core gauge rose 0.2 percent, also as projected.

Oh, the joys of doing business in kleptocracies run by thugs:

Yahoo! Inc. fell for a third day as signs of tension with Alibaba Group Holding Ltd. raised speculation it may benefit less from part ownership of China’s largest e-commerce provider.

Concerns surfaced after a May 10 Yahoo filing that said Alibaba Group spun off the lucrative Alipay online-payments business, and then deepened the next two days amid conflicting statements from Yahoo and Alibaba over Alibaba Group’s disclosure of the transfer.

Yahoo, based in Sunnyvale, California, fell as much as 7.1 percent to $15.96 in Nasdaq Stock Market trading. It has lost 10 percent since May 10, when it said the entire equity of Alipay had been transferred to a company controlled by Alibaba Chief Executive Officer Jack Ma.

Alibaba was paid about 300 million yuan ($46 million) for Alipay by a company controlled by Ma, reported today, citing public company registry data. Alibaba’s Spelich declined to comment on the report.

Alipay has a value of $5 billion, Brett Harriss, an analyst at Gabelli & Co., wrote in a report yesterday.

The Bank of Canada has released a discussion paper by David Bolder, Simon Deeley titled The Canadian Debt-Strategy Model: An Overview of the Principal Elements:

As part of managing a debt portfolio, debt managers face the challenging task of choosing a strategy that minimizes the cost of debt, subject to limitations on risk. The Bank of Canada provides debt-management analysis and advice to the Government of Canada to assist in this task, with the Canadian debt-strategy model being developed to help in this regard. The authors outline the main elements of the model, which include: cost and risk measures, inflation-linked debt, optimization techniques, the framework used to model the government’s funding requirement, the sensitivity of results to the choice of joint stochastic macroeconomic term-structure model, the effects of shocks to macroeconomic and term-structure variables and changes to their long-term values, and the relationship between issuance yield and issuance amount. Emphasis is placed on the degree to which changes to the formulation of model elements impact key results. The model is an important part of the decision-making process for the determination of the government’s debt strategy. However, it remains one of many tools that are available to debt managers and is to be used in conjunction with the judgment of an experienced debt manager.

I mentioned Jonathan Weill’s excellent column Greeks Blaming Speculators Sure Sign of Panic yesterday and now there’s reason to mention it again, now that Irshad Manji has written a column in the Globe titled The paranoid can’t handle the truth:

Routine, reactionary denial is a dead end. When conspiracy-peddling persists, what can ever be true? Indeed, the very idea of truth loses meaning. Which is why I can’t ascribe the popular label “truthers” to those who claim that 9/11 was itself an inside job.

It’s easy to dismiss the hyperventilating as simple nuttiness. But the nutters have an outsized impact on shared values, a crucial aspect of the glue that holds societies together. The decibel level of conspiracy merchants, amplified by the explosion of media platforms through which to express themselves, infects our very capacity for common purpose – and our human need for hope.

Is there a solution? I’d argue that students should be taught to think not just critically, but also “generatively,” so they can rationally reassemble the pieces of what they’ve just ripped apart. Thinking critically enables us to question the information we’re being fed, and that’s a good thing. But what then? Unless we can reason our way to factual accuracy, critical thinking easily degenerates into emotionalism – conflating emotion with evidence. Not a good thing.

Americans, for starters, should ask at what point Ronald Reagan’s adage of “trust but verify” encounters its corollary – “verified, now trust.”

Without insisting on each of these halves, citizens in any society can’t achieve a consensus that’s whole enough to move on to new challenges. Blowhards will keep poking holes in old news, falling through those holes and toward a pit where believing in nothing becomes the hallmark of truth. Sounds to me like a lie.

This is an interesting counterpoint to Jonathan Weill’s observatins:

For instance, the first paragraph of the article said euro- area finance ministers and European Commission officials had scheduled a secret meeting for that night in Luxembourg. That same day, a spokesman for Luxembourg Prime Minister Jean-Claude Juncker, who is chairman of the euro area’s council of finance ministers, told reporters for several news outlets that there was no meeting and that this part of the Spiegel story was wrong. Actually such a meeting did occur on May 6. The spokesman, Guy Schuller, later conceded he had lied.

Asked to explain why, Schuller told the Wall Street Journal that “I was told to say there was no meeting,” and that “we had certain necessities to consider.” The euro was falling on the Spiegel report and “there was a very good reason to deny that the meeting was taking place,” he said, namely “self- preservation.” Besides, he said, when Juncker says something to the markets, “nobody seems to believe it.”

And let’s not even get into Spend-Every-Penny’s blase dismissal of the Junior Republicans’ campaign pledge on the deficit.

Ms. Manji makes good points, but she ignores the other side of the equation. A world in which lying has become acceptable is a fertile ground for conspiracy-theory wingnuts.

A relatively quiet day on the Canadian preferred share market, with PerpetualDiscounts up 10bp, FixedResets gaining 3bp and DeemedRetractibles basically flat. There were two entries in the Performance Highlights tables, both MFC issues which went ex-Dividend today. Volume was low, although there were some pockets of size.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
(at bid)
Mod Dur
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.1174 % 2,447.1
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.1174 % 3,680.4
Floater 2.46 % 2.26 % 37,982 21.61 4 0.1174 % 2,642.2
OpRet 4.87 % 3.50 % 62,253 0.45 9 -0.0445 % 2,420.0
SplitShare 5.19 % -1.70 % 61,775 0.59 6 0.0420 % 2,507.6
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0445 % 2,212.9
Perpetual-Premium 5.74 % 5.21 % 130,728 1.01 9 -0.0176 % 2,063.3
Perpetual-Discount 5.53 % 5.55 % 121,482 14.51 15 0.1016 % 2,150.5
FixedReset 5.14 % 3.26 % 198,139 2.89 57 0.0266 % 2,311.0
Deemed-Retractible 5.18 % 4.92 % 294,823 8.14 53 -0.0006 % 2,120.6
Performance Highlights
Issue Index Change Notes
MFC.PR.C Deemed-Retractible 1.08 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.45
Bid-YTW : 6.32 %
MFC.PR.B Deemed-Retractible 1.36 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.15
Bid-YTW : 6.09 %
Volume Highlights
Issue Index Shares
RY.PR.R FixedReset 165,735 Desjardins crossed two blocks of 79,500 each at 27.02. These were 26 minutes apart, so it’s possible that it was the same 79,500 shares.
Maturity Type : Call
Maturity Date : 2014-03-26
Maturity Price : 25.00
Evaluated at bid price : 27.03
Bid-YTW : 3.26 %
CM.PR.E Deemed-Retractible 153,840 Nesbitt crossed 100,000 at 25.50. RBC crossed blocks of 30,000 and 20,000 at the same price.
Maturity Type : Call
Maturity Date : 2011-11-30
Maturity Price : 25.25
Evaluated at bid price : 25.46
Bid-YTW : 4.39 %
GWO.PR.G Deemed-Retractible 113,661 Nesbitt crossed 100,000 at 24.45.
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.45
Bid-YTW : 5.58 %
CM.PR.J Deemed-Retractible 65,059 TD bought 10,000 from National at 24.30, then crossed 25,000 at the same price.
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.25
Bid-YTW : 4.91 %
SLF.PR.A Deemed-Retractible 63,060 RBC crossed 25,000 at 22.96; Desjardins crossed 30,800 at 22.93.
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.90
Bid-YTW : 5.92 %
BNS.PR.Q FixedReset 57,991 Desjardins crossed 55,000 at 26.22.
Maturity Type : Call
Maturity Date : 2013-11-24
Maturity Price : 25.00
Evaluated at bid price : 26.20
Bid-YTW : 3.04 %
There were 25 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
CM.PR.M FixedReset Quote: 27.81 – 28.44
Spot Rate : 0.6300
Average : 0.4247

Maturity Type : Call
Maturity Date : 2014-08-30
Maturity Price : 25.00
Evaluated at bid price : 27.81
Bid-YTW : 3.00 %

PWF.PR.G Perpetual-Premium Quote: 25.16 – 25.49
Spot Rate : 0.3300
Average : 0.2205

Maturity Type : Call
Maturity Date : 2011-08-16
Maturity Price : 25.00
Evaluated at bid price : 25.16
Bid-YTW : 4.27 %

BAM.PR.M Perpetual-Discount Quote: 21.75 – 22.06
Spot Rate : 0.3100
Average : 0.2074

Maturity Type : Limit Maturity
Maturity Date : 2041-05-13
Maturity Price : 21.46
Evaluated at bid price : 21.75
Bid-YTW : 5.52 %

NA.PR.O FixedReset Quote: 27.50 – 27.75
Spot Rate : 0.2500
Average : 0.1660

Maturity Type : Call
Maturity Date : 2014-03-17
Maturity Price : 25.00
Evaluated at bid price : 27.50
Bid-YTW : 2.95 %

IAG.PR.C FixedReset Quote: 27.10 – 28.15
Spot Rate : 1.0500
Average : 0.9987

Maturity Type : Call
Maturity Date : 2014-01-30
Maturity Price : 25.00
Evaluated at bid price : 27.10
Bid-YTW : 3.21 %

IAG.PR.A Deemed-Retractible Quote: 22.21 – 22.40
Spot Rate : 0.1900
Average : 0.1393

Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.21
Bid-YTW : 6.14 %

2 Responses to “May 13, 2011”

  1. […] should be remembered, however, that Jean-Claude Juncker is a liar, unworthy of respect or […]

  2. […] It will be remembered that Jean-Claude Juncker is a liar with lying staff. […]

Leave a Reply

You must be logged in to post a comment.